Illegal Dismissal and Labor Claims in the Philippine Setting

Allegations of theft in the workplace sit at the most combustible intersection of discipline, trust, and livelihood. In Philippine labor law, an employer may dismiss an employee for theft-related acts—but only if (1) a lawful ground exists (substantive due process) and (2) the employer observes the required dismissal procedure (procedural due process). Failure on either axis exposes the employer to illegal dismissal liability and/or monetary consequences, while employees have specific remedies and strategies depending on what exactly went wrong.

This article maps the full landscape: legal bases, standards of proof, what “due process” means in labor cases, common fact patterns (cash shortages, inventory loss, pilferage, expense padding), the role of criminal cases, preventive suspension, evidence, remedies, and how claims are typically pleaded and defended before the NLRC and courts.

1) Governing Framework: Two Requirements, Two Different Failures

Philippine doctrine separates dismissal into:

A. Substantive Validity (Just Cause Must Exist)

The employer must prove that the termination is anchored on a valid cause under the Labor Code (commonly just causes). Theft allegations usually fall under:

Serious misconduct (e.g., stealing company property; dishonesty inconsistent with employment)
Fraud or willful breach of trust (often called loss of trust and confidence)
Commission of a crime or offense against the employer, the employer’s family, or authorized representatives
Analogous causes (when company rules define theft-related dishonesty as equivalent gravity)

(These appear in the Labor Code provisions on just causes, commonly cited as Article 297 [formerly Article 282], depending on the codification used in pleadings.)

B. Procedural Due Process (Correct Steps Must Be Followed)

Even if theft truly occurred, the employer must still follow statutory procedure. In private employment, “due process” in dismissal is statutory, meaning it is the process required by labor law regulations and jurisprudence (not the same as the constitutional due process applicable to government action, although the idea is similar).

Key point:

No just cause → dismissal is illegal, with reinstatement/backwages (or separation pay in lieu) and other potential awards.
Just cause exists but procedure was defective → dismissal may remain valid, but employer pays nominal damages for violating procedural due process.

2) Theft as a Ground for Dismissal: Which “Just Cause” Applies?

Employers frequently label theft dismissals as serious misconduct or loss of trust and confidence. The legal fit matters because each ground has distinct requirements.

A. Serious Misconduct

To qualify:

Misconduct must be serious, not trivial;
Must relate to the performance of duties showing unfitness to continue working; and
Must be willful (intentional), not a mere error in judgment.

Theft (including attempted theft) is typically serious because it is fundamentally incompatible with employment.

B. Fraud / Willful Breach of Trust (Loss of Trust and Confidence)

Often used when the employee holds a position where trust is intrinsic. Courts traditionally distinguish:

Managerial employees: dismissal for loss of trust is given wider latitude, but still requires factual basis.
Rank-and-file employees: loss of trust generally requires the employee to hold a position of trust (e.g., cashiers, property custodians, auditors, warehouse personnel, those handling funds or sensitive assets).

Loss of trust must be grounded on clearly established facts. It cannot rest on bare allegations, rumor, or generalized suspicion.

C. Commission of a Crime or Offense

Workplace theft can also be framed under “commission of a crime or offense,” especially when the act is directed against the employer or its representatives.

Important: A criminal conviction is not a prerequisite for valid dismissal. Labor cases apply a different standard of proof (substantial evidence), discussed below.

3) Standard of Proof: “Substantial Evidence,” Not “Beyond Reasonable Doubt”

In NLRC proceedings, the employer must prove dismissal causes by substantial evidence—“such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”

This is far lower than:

Beyond reasonable doubt (criminal cases), or
Preponderance of evidence (ordinary civil cases).

What this means in practice

An employer can validly dismiss for theft even if the prosecutor later dismisses the criminal complaint, or even if the employee is acquitted, depending on why the criminal case ended and what evidence exists in the labor case.
Conversely, an arrest, a police blotter, or a criminal complaint by itself does not automatically prove just cause. The NLRC looks for actual evidence showing the employee’s participation and intent.

4) The Required Procedure for Just-Cause Dismissal (Twin-Notice Rule)

For dismissals based on just causes (like theft), Philippine labor regulations and jurisprudence require two written notices and an opportunity to be heard.

Step 1: First Written Notice (Notice to Explain / Charge Sheet)

This must:

State the specific acts or omissions complained of;
Cite the company rule/policy violated (if any) and/or the labor-law ground invoked;
Give the employee a reasonable opportunity to submit a written explanation (commonly observed as at least five (5) calendar days in practice and regulations).

Common employer mistake: issuing a generic memo like “Explain why you should not be terminated for theft” without dates, items, amounts, witnesses, or the factual narrative. Vague charges undermine due process and can also weaken the substantive case.

Step 2: Opportunity to Be Heard (Hearing/Conference)

A full trial-type hearing is not always required, but the employee must be given a real opportunity to respond—through:

A conference or administrative hearing, especially when:
- the employee requests it,
- there are substantial factual disputes,
- the penalty is severe (dismissal), or
- credibility issues require clarification.

Common employer mistake: deciding to terminate immediately after receiving the written explanation, without any conference despite contested facts (e.g., denial, claim of frame-up, issues on custody of inventory).

Step 3: Second Written Notice (Notice of Decision)

This must:

Inform the employee that management has decided to dismiss them;
State the reasons and the basis for the finding;
Indicate the effective date.

Common employer mistake: termination by text message, verbal notice, HR “advice,” refusal to schedule, or “don’t report anymore” instructions—these are classic triggers for illegal dismissal findings.

5) “No Due Process” Scenarios: What Counts as Procedural Defect?

Procedural due process is commonly violated when:

No first notice was served (or it was too vague).
The employee was not given meaningful time to answer.
No opportunity to be heard was provided despite factual disputes.
The decision was made beforehand (“pre-judged”) and the process was a mere formality.
The second notice was not issued (or termination was communicated informally).
Notices were sent but not properly served (wrong address; no proof of service; purely verbal).
HR treated preventive suspension as a substitute for due process, then terminated without the required notices.

6) Preventive Suspension: Proper Use, Limits, and Abuse

Employers sometimes suspend employees accused of theft to protect evidence or property.

A. When preventive suspension is allowed

It is typically justified when the employee’s continued presence poses a serious and imminent threat to life or property, or could jeopardize an investigation (e.g., cashier accused of skimming, warehouse staff accused of pilferage).

B. Duration

Preventive suspension is commonly limited to 30 days. If the investigation requires more time, the employer may need to:

either reinstate the employee (even if under restrictions), or
extend suspension with pay (common approach in practice to avoid an illegal suspension finding).

C. Abuse patterns

Indefinite preventive suspension without pay;
“Suspension” used to coerce resignation;
Suspension without any real investigation or notices.

These can support claims for illegal dismissal (if it becomes constructive dismissal) or illegal suspension and wage claims.

7) Theft Allegations and Criminal Cases: How They Interact

A. Filing a criminal case is not required

An employer may proceed with administrative discipline and termination without waiting for police/prosecutor action.

B. Criminal acquittal does not automatically mean illegal dismissal

Because:

Criminal acquittal may be due to reasonable doubt, not necessarily a finding the employee did not do the act.
Labor standard is substantial evidence.

C. But the reason for acquittal matters

If the criminal court finds that the act did not happen or the accused was not the perpetrator, that factual determination can strongly support the employee’s labor case.

D. Parallel proceedings

It is common for:

a labor complaint (illegal dismissal + money claims) and
a criminal complaint (theft/qualified theft) to proceed simultaneously.

8) Common Fact Patterns and How They Are Evaluated

A. Inventory shortages / “lost stocks”

Employers must connect:

the missing items,
custody/control,
access logs,
documentary trail (inventory reports, receiving/issuance),
and a clear narrative of how the employee took or diverted property.

Weak cases often rely on “shortage = employee stole,” without showing exclusive access or tamper-proof controls.

B. Cash shortages / cashier discrepancies

Stronger cases use:

end-of-day balancing records,
CCTV,
POS logs,
witness statements,
marked money operations,
audit findings with traceability.

But employers still must address:

shared access,
system glitches,
management override,
procedural lapses in cash handling that create doubt.

C. Expense reimbursement fraud

Evidence typically includes:

falsified receipts,
supplier verification,
duplicate submissions,
mismatched dates,
policy violations (approvals, per diem rules).

D. “Entrapment” or “test-buy” operations

These can be valid evidence but are scrutinized for:

integrity of the operation,
chain of custody of items,
identification of the employee,
absence of manipulation.

9) Employer Burden and Evidence: What Usually Matters Most

Employer bears the burden

In dismissal cases, the employer must prove:

the fact of dismissal (often undisputed), and
the legality of the dismissal (just cause + due process).

Evidence that tends to carry weight

CCTV footage with proper authentication and clear identification
Inventory/cash audit reports tied to source documents
Affidavits of witnesses with consistent details
Admissions (but coerced admissions can be attacked)
Documentary trail: logs, receipts, delivery records, variance reports
Proof of notice service (receipts, acknowledgments, registered mail documentation)

Evidence that is often insufficient alone

Police blotter without corroboration
Anonymous tips
Unsupported accusations by a supervisor
Confessions obtained under intimidation or without context
Purely “mathematical” shortages without access-control analysis

10) If Due Process Was Missing: Legal Consequences (Nominal Damages vs Illegal Dismissal)

A. Just cause exists, but due process was not observed

The dismissal can be upheld as valid substantively, but the employer is typically ordered to pay nominal damages for violation of procedural due process (Philippine jurisprudence standardizes this as a deterrent and recognition of the statutory right to notice and hearing).

B. No just cause (even if employer “followed procedure”)

The dismissal is illegal, with the full remedies of illegal dismissal (reinstatement/backwages or separation pay in lieu, plus other possible awards).

C. Both no just cause and no due process

Still illegal dismissal, often with greater likelihood of additional damages depending on bad faith, harassment, or oppressive conduct.

11) Remedies and Monetary Awards in Illegal Dismissal Cases

When dismissal is found illegal, typical relief includes:

A. Reinstatement + Full Backwages

Reinstatement without loss of seniority rights and benefits; and
Full backwages computed from the time compensation was withheld until actual reinstatement.

B. Separation Pay in Lieu of Reinstatement

Instead of reinstatement, separation pay may be awarded when reinstatement is no longer viable (commonly due to strained relations, closure, or other practical reasons). This is fact-sensitive.

C. Other monetary claims that may be joined

Employees often include:

Unpaid wages
Overtime, holiday pay, premium pay, night shift differential
13th month pay differentials
SIL pay conversion
Unpaid commissions/incentives if legally demandable
Final pay and pro-rated benefits

D. Damages and attorney’s fees

Moral and exemplary damages are not automatic; they generally require proof of bad faith, fraud, oppression, or malevolent manner of dismissal (e.g., public shaming as “thief,” harassment, fabricated charges).
Attorney’s fees may be awarded in certain cases, commonly when the employee is forced to litigate to recover lawful wages/benefits.

E. “Financial assistance” doctrine limits

Courts have, in some situations, granted separation pay as a measure of social justice even where dismissal was for just cause. But this is typically not extended to dismissals for serious misconduct or acts reflecting moral depravity—workplace theft and similar dishonesty are frequently treated as disqualifying.

12) What the Employee Can File: Typical Causes of Action

A theft-accused employee who was terminated “without due process” commonly files:

Illegal dismissal (primary cause)
Money claims (final pay and statutory benefits)
Damages (if dismissal was done in bad faith or in a humiliating/public manner)
Illegal suspension / constructive dismissal (if placed on prolonged preventive suspension or forced resignation)

The case usually starts with mandatory conciliation (Single Entry Approach), then proceeds to the NLRC if unresolved.

13) Prescription Periods (Deadlines) Commonly Invoked

Prescription rules can be outcome-determinative:

Illegal dismissal claims are generally treated as claims for injury to rights, commonly subject to a four (4)-year prescriptive period.
Money claims arising from employer-employee relations (like unpaid wages and benefits) are commonly subject to a three (3)-year prescriptive period.

When combined in one complaint, each claim is measured by its applicable prescriptive rule.

14) Practical Litigation Realities at the NLRC

A. Paper-driven process

NLRC cases are commonly resolved through:

position papers,
documentary evidence,
affidavits,
and limited hearings/clarificatory conferences.

B. Technical rules are relaxed—but credibility still matters

Even with flexibility, inconsistent affidavits, missing documents, and weak proof of service of notices often decide cases.

C. Constructing the “theft narrative” is critical

Employers win theft-based dismissals when they present:

a coherent timeline,
credible proof of access and taking,
and policy-based justification for trust breakdown.

Employees win when they show:

lack of exclusive access,
procedural irregularities in investigation,
absence of intent,
weak identification,
or management’s failure to meet substantial evidence.

15) Special Risks for Employers: Public Accusations, Blacklisting, and Privacy

Even if theft is suspected, employers should be careful about:

posting names/photos on bulletin boards or social media as “thief,”
announcing accusations to customers or unrelated staff,
circulating defamatory emails,
imposing “blacklisting” practices.

These can fuel independent liability (civil, and potentially criminal) and strengthen labor claims for moral and exemplary damages when the manner of dismissal is oppressive.

16) Checklist Summaries

Employer compliance checklist (theft allegation)

Identify correct legal ground (serious misconduct / breach of trust / crime).
Gather substantial evidence (CCTV, audit trail, affidavits, logs).
Issue a detailed first notice (facts, dates, items, amounts, rule violated).
Give reasonable time to explain.
Hold a conference/hearing when facts are disputed or when requested.
Issue a reasoned decision notice.
Properly document service of notices.
Use preventive suspension only when justified; observe time limits.

Employee evaluation checklist (was it illegal?)

Was there a detailed notice to explain?
Was there real time and opportunity to answer?
Was there a hearing/conference when denial or factual dispute existed?
Is there substantial evidence actually linking you to theft (not just shortage)?
Were you singled out despite shared access?
Were you coerced to resign or suspended indefinitely?
Were you publicly shamed or accused without basis?

17) Core Takeaways

Theft can be a valid just cause for dismissal in the Philippines, typically under serious misconduct and/or loss of trust and confidence, but it must be proven by substantial evidence.
Due process is mandatory: two notices and an opportunity to be heard.
No just cause = illegal dismissal with reinstatement/backwages (or separation pay in lieu) plus possible damages and attorney’s fees.
Just cause exists but procedure was flawed = nominal damages, while dismissal may still stand.
Criminal cases and labor cases are related but not determinative of each other because they use different standards and objectives.